FLORANTE VITUG, Petitioner, vs.

EVANGELINE A. ABUDA, Respondent.

G.R. No. 201264 | January 11, 2016 | LEONEN, J.

Parties who have validly executed a contract and have availed themselves of its benefits may not,
to escape their contractual obligations, invoke irregularities in its execution to seek its
invalidation.

FACTS:
On March 17, 1997, Abuda loaned P250,000.00 to Vitug and his wife, Narcisa Vitug. As security
for the loan, Vitug mortgaged to Abuda his property in Tondo, Manila. The property was then
subject of a conditional Contract to Sell between the National Housing Authority and Vitug.

On November 17, 1997, the parties executed a "restructured" mortgage contract on the property
to secure the amount of P600,000.00 representing the original P250,000.00 loan, additional
loans, and subsequent credit accommodations given by Abuda to Vitug with an interest of 5%
per month. By then, the property was under Vitug's name.

Spouses Vitug failed to pay their loans despite Abuda's demands.

On November 21, 2003, Abuda filed a Complaint for Foreclosure of Property before the Regional
Trial Court of Manila. On December 19, 2008, the Regional Trial Court promulgated a Decision
in favor of Abuda.

Vitug appealed the December 19, 2008 Regional Trial Court Decision before the Court of Appeals.
On October 26, 2011, the Court of Appeals promulgated a Decision affirming the decision of
the RTC.

On November 23, 2011, Vitug moved for the reconsideration of the Court of Appeals' October
26, 2011 Decision. He pointed out that not all the requisites of a valid mortgage contract were
present since he did not have free disposal of his property when he mortgaged it to Abuda. His
transfer certificate of title had an annotation by the National Housing Authority, which restricted
his right to dispose or encumber the property. The restriction clause provided that the National
Housing Authority's consent must first be obtained before he may dispose or encumber his
property.

According to Vitug, Abuda failed to get the National Housing Authority's consent before the
property was mortgaged to him. Vitug also argued in his Motion for Reconsideration that the
property was exempt from execution because it was constituted as a family home before its
mortgage. On March 8, 2012, the Court of Appeals denied Vitug's Motion for Reconsideration.

Vitug filed this Petition for Review on Certiorari under Rule 45 to assail the Court of Appeals'
October 26, 2011 Decision and its March 8, 2012 Resolution.
ISSUE/S:
Whether the restriction clause in petitioner's title rendered invalid the real estate mortgage he
and respondent Evangeline Abuda executed.

HELD:
NO. Real estate mortgage between Vitug and Abuda is valid.

All the elements of a valid mortgage contract were present. For a mortgage contract to be valid,
the absolute owner of a property must have free disposal of the property. That property must be
used to secure the fulfillment of an obligation. As provided for by Article 2085 of the Civil Code.

Petitioner's undisputed title to and ownership of the property is sufficient to give him free
disposal of it. As owner of the property, he has the right to enjoy all attributes of ownership
including jus disponendi or the right to encumber, alienate, or dispose his property "without
other limitations than those established by law."

The National Housing Authority's restrictions were provisions in a contract it executed with
petitioner. This contract bound petitioner to certain conditions before transferring or
encumbering the property. Specifically, when the National Housing Authority sold the property
to petitioner, petitioner became obligated not to sell, encumber, mortgage, lease, sublease, alter,
or dispose the property without the National Housing Authority's consent.

These restrictions do not divest petitioner of his ownership rights. They are mere burdens or
limitations on petitioner's jus disponendi. Thus, petitioner may dispose or encumber his property.
However, the disposition or encumbrance of his property is subject to the limitations and to the
rights that may accrue to the National Housing Authority. When annotated to the title, these
restrictions serve as notice to the whole world that the National Housing Authority has claims
over the property, which it may enforce against others.

Contracts that only subject a property owner's property rights to conditions or limitations but
otherwise contain all the elements of a valid contract are merely voidable by the person in whose
favor the conditions or limitations are made.

The mortgage contract entered into by petitioner and respondent contains all the elements of a
valid contract of mortgage. The trial court and the Court of Appeals found no irregularity in its
execution. There was no showing that it was attended by fraud, illegality, immorality, force or
intimidation, and lack of consideration.